Elevance stock slides on lower forecast

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Elevance Health has reported net income of $1 billion during the third quarter, compared to $1.3 billion during the same period in 2023, a 22.5% decrease.

However, for the nine months ending September 30, net income is $5.5 billion, an increase when compared to last year's figure of $5.1 billion.

Shares of Elevance Health fell 12% Thursday morning after the health insurer lowered its forecast for full-year earnings, according to Seeking Alpha.

President and CEO Gail Boudreaux also cited Medicaid and the timing mismatch between Medicaid rates and acuity. It was a reason also given by UnitedHealth Group earlier this week as a headwind in its earnings.

State customer rate actions in Medicaid do not yet reflect the higher acuity of members who remain in Medicaid following the redetermination process, according to UnitedHealth Group.

Boudreaux said, "We remain confident in the long-term earnings potential of our diverse businesses as we navigate a dynamic operating environment and unprecedented challenges in the Medicaid business. We expect Medicaid rates will align with the needs of our members in time, and are taking proactive actions to enhance operational efficiencies that will ensure we emerge from this period even stronger."

WHY THIS MATTERS

Elevance is facing higher than expected medical expenses in the third quarter, according to the Seeking Alpha report.

However, the company had an increase in revenue driven by higher premium yields in the Health Benefits segment and growth in CarelonRx product revenue, partially offset by membership attrition in the Medicaid business, the report said.

THE LARGER TREND

Shares of peer insurers also dropped premarket, according to Seeking Alpha: Molina Healthcare -11.18%, Centene -8%, CVS Health -1.68% and Humana -2.18%.

Earlier this week during UnitedHealth's earnings call, CFO John Rex called attention to the continued "pronounced upshift in coding intensity by hospitals." 

"In some cases," Rex said, "the coding actions are extreme. Certain entities have been notably and persistently aggressive, having up shifted their coding intensity factors by more than 20%. We are actively addressing this unnecessary additional cost burden to the health system."

Another factor, Rex said, is the rather rapid acceleration in the prescribing of certain high-cost specialty medications, primarily those used to treat cardiovascular disease, autoimmune disorders and cancer. "We believe a contributing factor to the acceleration was the Inflation Reduction Act, which eliminated the individual coinsurance requirement during the catastrophic coverage phase," Rex said.

Email the writer: SMorse@himss.org